Centrica’s
investor-pleasing arsenal is depleted

Pedestrian earnings growth, and an uninspiring plan ‘centred on acquisitions and with
heightened reinvestment risk’ will constrain Centrica (CNA.L) shares, Bank of America Merrill Lynch analysts say,
cutting their rating on the British Gas owner from ‘neutral’ to ‘underperform’.

After Centrica pulled out of plans to Build British nuclear power plants, saying it
would return £500 million of surplus capital to its shareholders, the focus now shifts to a
strategy day at the end of February, analyst Fraser McLaren says.

But it doesn’t look pretty. McLaren, who has a target price of 320p for the shares,
continues: ‘Given persistent challenges in several markets and mixed success in delivering
previous targets, we fear that the strategy message on 27th February could be
underwhelming.

‘North America is likely to be a particular focus and there is a danger that utility
investors could become disillusioned if upstream ambitions are enhanced. Centrica may have
already used most of its investor-pleasing arsenal, and reinvestment risk could now
dominate.’

Shares in the group closed at 348.3p on Tuesday, down 0.7p or 0.2%.

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Buy Capita
ahead of annual results, JPM urges

Now's the time to buy Capita (CPI.L) shares, JP Morgan
analyst Robert Plant says, ahead of what he expects to be encouraging full-year results at
the end of the month.

'We believe that Capita’s rating is ultimately determined by the direction of organic
revenue growth and a possible improvement in growth could both lead to estimates being
raised and a prei to earnings ratio (PER) re-rating,' he said.

'In particular, we believe that Capita is benefiting from a pick-up in UK public sector
activity which we think will build all the way to the 2015 UK General Election.'

The shares used to trade at a PER of 24x, he noted, but this has fallen to 13.7x since
organic growth started to decline. The group's annual results come out on 28 February.

Shares in the group closed at 784.9p on Tuesday, up 0.5p or 0.06%.

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Buying
opportunity in Serco, Shore Capital says

The recent rough patch for Serco (SRP.L) presents investors
with a buying opportunity, according to Shore Capital analyst Robin Speakman.

The analyst acknowledged that the US market remains a source of pain for the company,
and margins are likely to remain flat this year. However, he said the shares trade at a
discount to the group's rivals, and last year's contract win record of £5.6 billion offers
grounds for optimism.

'We would observe that while the positives remain in more constant fashion, over the
course of 2013, much of the negative headwinds are likely to ameliorate and fade, others
such as cash and accounts presentation are within management’s power to challenge,' he
said. 'We retain a BUY stance on the valuation opportunity.'

Shares in the group closed at 556.5p on Tuesday, up 3p or 0.5%.

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Charles
Stanley backs BG Group

Investors should keep faith with oil explorer BG Group (BG.L), accoding to Charles Stanley analyst Jeremy
Batstone-Carr, even though it has reduced its profit and production forecasts for the year
ahead.

Fourth-quarter earnings of $1.03 billion were in line with estimates, up 3% year-on-
year, but 2013 LNG profit guidance of $2.5-2.7 billion was below market expectations of
$3.2-3.5 billion.

In October BG shocked investors with a reduced production profile for 2013, and the
rerating of the shares since then strengthens the case for an 'accumulate' recommendation,
Batstone-Carr said.

'with a focus on Upstream and LNG (ie. no refining business) and still a positive growth
outlook, the share still deserves a higher rating to the other oil & gas majors,' he
said.

Shares in the group closed at £10.81 on Tuesday, down 22.4p or 2%.

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